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Southwest Volume Rebounds for 6.1% Gain

DALLAS - After a flat first quarter, new-issue volume in the Southwest rebounded in the second, propelling the region to a 6.1% overall increase for a total of $41.4 billion in the first half of 2008.

A flood of refundings on the heels of the collapse of the auction-rate securities market helped boost volume 11.6% in the second quarter. Refunding volume increased by 51% while variable-rate deals with a short put surged 294%. New-money issuance rose nearly 10%, according to Thomson Reuters.

Amid the liquidity crisis and falling ratings for several bond insurers, insured deals fell by 40%. Those backed by letters of credit soared 418%. Standby purchase agreements were up 143%.

The ongoing housing finance crisis contributed to a 44% drop in housing issues, with only 47 issues, compared to 88 in the same period of 2007.

Transportation issues in the Southwest increased by 83%, led by $3.2 billion worth of bonds sold by the North Texas Tollway Authority for its State Highway 121 toll project. Electric power deals were up 66%.

The North Texas Tollway Authority was the top-ranking issuer in the region. It sold the largest single issue in the Southwest in the first half - $2.4 billion on March 6. That helped elevate RBC Capital Markets to the top among financial advisers, with a total of $8.3 billion worth of deals.

RBC was followed by First Southwest Co. at $6.3 billion, Estrada Hinojosa & Co. at $2 billion, Public Financial Management Inc. at $1.8 billion, and Kaufman Hall & Associates at $1.4 billion.

While RBC displaced First Southwest from the top spot in the first half, First Southwest still handled far more issues than any other FA in the region with 179, nearly double the number of RBC's.

JPMorgan maintained its ranking as top senior manager with $5.1 billion worth of deals, followed by Merrill Lynch & Co. at $4.7 billion, Citi at $3.7 billion, Lehman Brothers at $3.5 billion, and UBS Securities at $3.2 billion. UBS will disappear from the rankings this year after exiting the municipal bond business.

McCall Parkhurst & Horton also retained its top ranking among bond counsel with $7.3 billion of issues, a nearly 33% increase over last year's $5.5 billion. Vinson & Elkins rose to second place from third on $5.2 billion worth of deals, followed by last year's number two, Fulbright & Jaworski. Kutak Rock at $2.6 billion and Ballard Spahr Andrews & Ingersoll at $2.1 billion rounded out the top five.

Breaking the pattern in other states, Texas saw new-issue volume increase in the first quarter, up 10.4%, though volume in the second quarter inched up only 0.3%. That left the state up 4.8% for the first half at $23.5 billion.

The transportation sector was a big gainer, rising 93% to $5.6 billion, boosted by NTTA's record $3.2 billion of bonds and Texas Transportation Commission's $1.1 billion. Housing was the big decliner, falling 85% to $92.5 million.

Refundings grew by nearly 50%, while new money inched upward only 1.3%.

Private placements soared 451%. Insured bond volume fell 39%, letters of credit jumped 202%, and standby purchase agreements rose 112%. Fixed-rate deals fell nearly 7% while variable rate with a short put rose 256% and long put or no put VRDOs rose 326%.

Merrill Lynch topped the list of senior managers, with 15 issues totaling $3.4 billion, a photo finish with JPMorgan, whose 19 deals were valued at only $2.2 million less. Both claimed a market share of 14.4%, followed by Citi, Lehman Brothers, and UBS.

RBC Capital Markets' representation of the NTTA paid off in top ranking among financial advisers. RBC's 61 issues worth $6.5 billion was good for a 28% market share in Texas, good enough to topple First Southwest, whose 172 deals were worth $5.7 billion and a 25% market share. Rounding out the top five were Estrada Hinojosa, Southwest Securities, and Public Financial Management Inc.

McCall Parkhurst secured first place among Texas bond counsel with a 31% market share versus 22% for second-place Vinson & Elkins. McCall Parkhurst handled the most deals, 116, and the largest volume, $7.3 billion.

Four of the top five issuers in the first half were from Texas. NTTA was followed by Texas Municipal Gas Corp. with $1.3 billion, Harris County Health Facilities Development Corp. at $1.2 billion, and the Texas Transportation Commission at $1.1 billion.

Arizona's Salt River Project Agricultural Improvement Power District ranked fifth with $817 million. In Arizona, electric power projects accounted for $1.05 billion of new issues, second behind $1.07 billion of general purpose debt.

Total issuance in Arizona rose more than 10%. Compared to last year's first half, general purpose bonds were down 34%. On a percentage basis, transportation was a big gainer in the state, up 787%, followed by public facilities at 513%.

In keeping with market trends, refundings were up 113%, while new money rose 41%. Letters of credit rocketed 1,283% while bond insurance fell 33%.

JPMorgan ranked first among Arizona senior managers with only three issues accounting for $974 million and 17% of the state's market.

RBC, the region's leading financial adviser for the first half, took the top spot in Arizona with 13 issues valued at $936 million for a 17% market share.

Squire Sanders & Dempsey topped the bond counsel ranks with 16 issues worth $1.26 billion for 22% of the market.

Colorado's issuance fell sharply in the first quarter, down 53%, and rebounded strongly in the second, up 43%, resulting in a first-half increase of 8.5% to $5.4 billion.

Electric power was the biggest gainer, rising 555%, to $676 million.

The Denver School District's $750 million deal was the largest in the state and the fifth largest in the region.

The top senior manager in the state was Goldman, Sachs & Co., which handled $608 million of bonds for Denver International Airport, including conversion of the airport's auction-rate bonds. Goldman's three deals in the state were worth $659 million for a 12.9% market share. Close behind was Merrill Lynch, which managed Colorado Springs' first prepaid gas deal valued at $653 million.

Total debt sales in Kansas were off slightly in the first half of 2008, with sales of $1.23 billion in 114 issues. The volume was down 14.5% from the first half of 2007.

On a percentage basis, New Mexico showed the largest increase in volume, up 88% to about $2 billion. Utah, whose Utah Transit Authority issued $700 million, saw a 60% increase, to $2.4 billion.

In New Mexico, education accounted for a major portion of the increase, rising 814% to $507 million. Utilities rose 98% to $73 million while general purpose increased 50% to $544 million.

The collapsing auction-rate market prompted the state's largest issue, $436 million for the New Mexico Education Assistance Foundation student loan program led by Banc of America Securities, which ranked as top senior manager for the state.

With five deals, the New Mexico Finance Authority ranked as top overall issuer in the state, selling $629 million of debt.

Sales volumes in Oklahoma dropped almost 50% in the first half of 2008, but the number of debt issues rose slightly. Total sales went to $818.4 million over 230 sales in 2008 from $1.6 billion and 214 issues in 2007.

Most of the activity was on the local level, with school districts selling $380 million of debt over 200 issues, and cities and towns posting sales of $143 million in eight issues. State agencies also issued $226.7 million in 11 sales.

Oklahoma City tapped into $835.5 million of 20-year bonds approved by voters in December 2007 with March's competitive sale of $67.6 million of GOs. The issue also included the eighth tranche from a $340 million bond package approved in 2000.

Tulsa sold $44.5 million of GOs in March from a $250 million authorization approved by voters in 2005.

Utah's volume climbed a healthy 60% with a $700 million deal from the Utah Transit Authority, the seventh-largest deal in the region, and a $426 million refunding from the Intermountain Power Agency.

Most of the action took place in the second quarter, which saw volume soar 111%, but the first quarter also saw gains of 18%. Electric power, utilities, and transportation drove most of the volume.

Zions First National Bank stayed atop the financial adviser rankings with $872 million of deals and a 38% market share.

In Arkansas, the region's smallest issuer, debt sales fell by more than half in the first two quarters of 2008, with 74 issues totaling $433.2 million, down from $914.2 million over 88 issues in the first half of 2007.

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